Correlation Between Legg Mason and Vanguard Multi-sector
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Vanguard Multi-sector at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Legg Mason and Vanguard Multi-sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and Vanguard Multi Sector Income, you can compare the effects of market volatilities on Legg Mason and Vanguard Multi-sector and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Legg Mason with a short position of Vanguard Multi-sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Vanguard Multi-sector.
Diversification Opportunities for Legg Mason and Vanguard Multi-sector
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Vanguard Multi Sector Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multi Sector and Legg Mason is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Legg Mason Global are associated (or correlated) with Vanguard Multi-sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Multi Sector has no effect on the direction of Legg Mason i.e., Legg Mason and Vanguard Multi-sector go up and down completely randomly.
Pair Corralation between Legg Mason and Vanguard Multi-sector
Assuming the 90 days horizon Legg Mason Global is expected to generate 0.84 times more return on investment than Vanguard Multi-sector. However, Legg Mason Global is 1.18 times less risky than Vanguard Multi-sector. It trades about 0.28 of its potential returns per unit of risk. Vanguard Multi Sector Income is currently generating about 0.09 per unit of risk. If you would invest 915.00 in Legg Mason Global on November 3, 2024 and sell it today you would earn a total of 11.00 from holding Legg Mason Global or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Vanguard Multi Sector Income
Performance |
| Timeline |
| Legg Mason Global |
| Vanguard Multi Sector |
Legg Mason and Vanguard Multi-sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Vanguard Multi-sector
The main advantage of trading using opposite Legg Mason and Vanguard Multi-sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Vanguard Multi-sector can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Multi-sector will offset losses from the drop in Vanguard Multi-sector's long position.| Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Fulcrum Diversified Absolute | Legg Mason vs. Wells Fargo Diversified |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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